Xstrata, the Swiss miner now exploring a merger of equals with Anglo American, is nothing if not opportunistic. For the commodities sell-off has been a leveller: Anglo's market capitalisation has fallen to almost the same as Xstrata's ￡20bn, putting it within reach of the more entrepreneurial miner. The attractions to Xstrata of a combination with the London-listed South African mining house lie in platinum, coal and copper, commodities they both mine.

Furthermore, Anglo looks to be in a weaker position than many of its competitors in the industry. Others, including Xstrata, have raised capital to weather the commodities cycle, yet Anglo has relied on refinancing debt, freezing capital expenditure and cutting its dividend. It is not well placed to seize on a recovery in commodities. The more aggressively managed Xstrata could change that. But what are the obstacles to a deal?

For any deal to succeed, it must win the approval of South African regulators. The government detests hostile takeovers, especially by foreigners. Although Anglo is London-listed, its operations are mostly in South Africa. In spite of
a love-hate relationship with Anglo, Pretoria still views it as a national champion. Then there is platinum miner Lonmin in which Xstrata acquired a near 25 per cent stake last year. Given Anglo Platinum's position as the largest producer of the precious metal, South African anti-trust authorities would likely block even a friendly merger unless Xstrata sold its Lonmin stake.